As a trade war heats up between Erdogan and Trump, soaring prices rattle Turkey

ISTANBUL —The bite from Turkey’s troubled economy is sharpest at society’s edges, where Ahmed Khlef — a Syrian, a refugee and a day laborer — had watched inflation eat away at the $150 he put away every month to send to relatives back home.

But this month, the family, including his parents and siblings, would have to do without. The lira was falling again and prices of food, utilities and shampoo were increasing. What he scraped together, he said, “would barely be enough for me.”

In a carpet shop in Istanbul’s Grand Bazaar, Serhat Gokkaya felt the pain, too. Climbing prices had already forced him out of retirement to take a few shifts at the shop. But the free-spending customers — the ones from Europe and the United States — had stopped coming years ago, during a season of political instability in Turkey marked by protests, terrorist bombings and the authorities’ escalating repression.

“Now,” he said, “there is this pastor thing.”

The pastor is Andrew Brunson, an American missionary from North Carolina, whose detention by Turkish authorities has touched off the worst dispute between the two NATO allies in more than four decades. Their volcanic argument, with barbed tweets from U.S. officials and caustic retorts from Turkey, has devolved over the past week into a budding trade war, one that has battered Turkey’s vulnerable economy, pushed the lira to record lows and forced Turkish citizens — along with millions of refugees who live in the country — to shoulder the consequences.

The latest salvo came Wednesday, when Turkey announced that it was raising tariffs on a number of products imported from the United States, including passenger cars, tobacco and spirits. The move was retaliatory, after President Trump announced last week, on Twitter, that the United States was doubling tariffs on imported Turkish metals.

Turkish President Recep Tayyip Erdogan talks on an iPhone inside his car stationed over the Bosporus Bridge in Istanbul in December 2015. (Yasin Bulbul/AP)

The United States levied sanctions earlier this month against two senior Turkish officials. President Recep Tayyip Erdogan, who has accused the United States of bullying and economic sabotage, has promised to boycott U.S.-made electronics, including Apple’s iPhone.

From the sidelines, many Turks have rallied around Erdogan, accepting his argument that the economy is besieged by hostile powers and cooperating with his request to sell dollars and gold to support the lira. But others, including business owners already staggering from the downturn, were reading the mood of a nervous nation and bracing for worse.

“Of course, this affects everyone,” said Mehmet Emin Oymak, who owns a camera shop in the Sirkeci district of Istanbul. “People are more cautious. We don’t have customers.” Over the past week, he had been forced to raise the prices on his inventory of imported Japanese cameras and lenses, adding to his problems.

“Nobody is buying anything,” he said.

People cross the street underneath a billboard advertising the iPhone X in Istanbul. Turkish President Recep Tayyip Erdogan called on his people to boycott Apple products. (Chris McGrath/Getty Images)

Ozcan Ozcelik, who has owned a gold shop in the Grand Bazaar for decades, has been glued to his phone of late, tracking the frenetic price of gold. “It changes every hour,” he said. The current rate was too high for all but his most loyal Turkish customers. Tourists had returned to the bazaar, after several difficult years, but most of them were frugal, too.

Nearby, at a foreign-currency exchange stall where customers could also sell gold, business was brisk. “People want to take advantage” of the high price of gold, said Erkan, a 24-year-old employee who was weighing two gold rings a customer had pulled out of her purse. They also “want to help the state,” he added.

In the days since the lira started its nosedive, “we don’t have time to eat,” said Erkan, who requested that only his first name be used because the government has threatened legal action against people accused of spreading rumors about the currency.

He strongly supported Erdogan’s stand against the United States, even as Erkan acknowledged that he and other Turks faced difficult financial choices because of the lira’s drop. He was taking the sacrifices in stride. “Things I buy may go up by 30 lira,” he said, or the equivalent of $5 at the rate of exchange on Wednesday night. “Maybe I won’t smoke nargileh that day,” he said, referring to smoking tobacco through a water pipe.

“Previous leaders of Turkey would go to America and bow their heads,” he said. But that was the “old Turkey,” he said.

After his wife sold a gold bracelet at another stall, Guney Yagci, who said he worked in security for the Turkish president, portrayed the sale as a matter of national pride. “The only thing that matters now is that we stand together,” he said, dismissing worries about inflation or a trade war with the United States. After all, he said, Turkey has other friends, including China.

Even those critical of Erdogan’s policies have wondered why Trump, who must have known that his tariffs would harm the lira, had decided to pile on.

“He’s crazy,” said Mustafa Bas, who works in an import-export business in Istanbul’s Karakoy district. “I can’t believe Americans chose someone like this.”

Still, he said, many of Turkey’s economic problems were self-inflicted, caused by debts incurred by its companies, and a market-rattling decision by Erdogan to appoint his son-in-law as the minister of finance and treasury. The crisis had not started with Trump. Imports had been down for months, he said. Importers “are waiting for the markets to settle.”

The lira strengthened for a second straight day Wednesday, but there was no sign that the dispute between the United States and Turkey would be settled anytime soon. A White House statement Wednesday called Turkey’s imposition of tariffs “a step in the wrong direction.” And a Turkish court on Wednesday denied an appeal filed by Brunson’s lawyer requesting his release from house arrest.